CA: Retail Sales

Thu Feb 22 07:30:00 CST 2018

Consensus Actual Previous
Month over Month -0.1% -0.8% 0.2%
Year over Year 5.8% 6.5%

December retail sales tumbled 0.8 percent on the month after three consecutive monthly increases. Despite this decline, retail sales were up 1.5 percent in the fourth quarter and up 6.7 percent for the year. On the year, sales were up 5.8 percent. Sales fell in 6 of 11 subsectors representing 42 percent of retail trade. Lower sales at general merchandise, health & personal care and electronics & appliance stores more than offset increased sales at motor vehicle & parts dealers and food & beverage stores. Excluding motor vehicle & parts dealers, retail sales decreased 1.8 percent. Sales volumes, more relevant to real GDP, also declined 0.8 percent, the largest drop since March 2016 as well. The decline is downside risk to the Bank of Canada's fourth quarter GDP growth estimate.

Motor vehicle and parts dealers increased 2.1 percent in December, following a 3.4 percent decline in November. Higher sales at new car dealers more than offset declines at used car dealers, other motor vehicle dealers and automotive parts, accessories and tire stores. Receipts at food and beverage stores increased primarily due to stronger sales at supermarkets and other grocery stores. All other store types in this subsector reported gains.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The headline data are reported in cash terms and disaggregated into eleven main subsectors. Aggregate volume figures are also provided.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.